The
Court of Appeals rested its affirmance on issue preservation grounds, that is,
the failure of the petitioners to argue to the circuit court that they had a
meritorious defense.[1]
A meritorious defense is necessary in order for a judgment to be set aside
under Rule 60(b). SeeMitchell Supp. Co., Inc. v. Gaffney, 297
S.C. 160, 375 S.E.2d 321 (Ct. App. 1988). The Court of Appeals did not decide,
nor do we, whether a meritorious defense as to damages alone and not as to
liability is an adequate basis for the grant of Rule 60 relief. Moreover, we
do not decide whether a party demonstrating a meritorious defense to the
damages awarded in the default proceeding would be entitled to have the entire
judgment set aside or merely the damages award.

Since
the issue of a meritorious defense was neither raised to nor ruled upon by the
circuit court,[2] the decision of the Court of Appeals is

CHIEF JUSTICE
TOAL: I respectfully dissent. This
case presents an unusual fact scenario where New Prime, Inc. and Deaton
(collectively, Petitioners) challenge a default judgment—obtained, in my
opinion, by Respondents' trickery and deception—by contesting damages, rather than
contesting liability. The majority concludes the issue of whether the default
judgment should be set aside is unpreserved for appellate review because a
meritorious defense was neither raised to, nor ruled upon by the circuit
court. I believe both Petitioners raised a meritorious defense in their
original pleadings before the circuit court by noting the substantial
discrepancy between the damages awarded upon default and the medical expenses
incurred or the settlement offer advanced by the plaintiffs. The circuit court
ruled on that issue, finding Petitioners did not make a meritorious defense.
It is a question of first impression in this state whether a meritorious
defense to a default judgment may relate to damages or whether it may only
involve a defense to liability. That question was squarely before the court of
appeals when the circuit court found Petitioners failed to raise a meritorious
defense. As such, it should be weighed on this Court's scales.

Because the
majority neglected to include an explanation of the facts in its affirmance, I
include a recitation here. In this case, Petitioners appeal the decision of
the court of appeals upholding the circuit court's denial of each of
Petitioners' Rule 60(b), SCRCP, motions.

On
August 5, 2002, Deaton was driving a truck for his employer, New Prime, when
Deaton was involved in an accident with Respondent Ann McClurg. Zurich North
American (Insurer) insured New Prime under a commercial trucker's general
liability policy with a $2 million per accident deductible.

Insurer learned of
the accident on August 6, 2002, and began an investigation. In September 2002,
Insurer received a letter of representation from the lawyer (Lawyer)
representing both Ann McClurg and her then-living husband Stephen McClurg. In
October 2002, Deaton left New Prime's employment.

Insurer and Lawyer
remained in contact, discussing injuries, medical treatments, and settlement
negotiations. In April 2004, Insurer received a settlement package from Lawyer
demanding $170,000 to settle all claims. On June 28, 2004, Lawyer sent Insurer
a letter referencing "McClurg v. New Prime and Deaton," and stating
that if Insurer did not respond by next week regarding the settlement offer, he
would "file suit and serve the Defendant and send [Insurer] a courtesy
copy of the pleadings." In October 2004, Lawyer sent Insurer another
letter enclosing a draft complaint naming only Respondent Ann McClurg as
plaintiff and only New Prime as defendant, alleging that New Prime was
vicariously liable for Deaton's negligence, and New Prime was liable for the
negligent hiring, retention, and training of Deaton. Later that month, Insurer
contacted Lawyer who agreed to delay filing the suit. For the next eight
months, until June 2005, Insurer and Lawyer exchanged settlement offers, but
the parties could not reach an agreement. At no time during these exchanges
did Lawyer indicate he intended to pursue an action solely against Deaton. In
May 2005, Lawyer sent Insurer a new medical report, without mentioning that in
April 2005 he had filed suit on behalf of both McClurgs against Deaton only.

Lawyer attempted to
serve Deaton in April 2005 through the South Carolina Department of Motor
Vehicles (SCDMV) pursuant to South Carolina Code section 15-9-350. That
attempt at service was returned and marked as "insufficient
address." Lawyer then hired a private investigator, who found an
alternate address for Deaton in Texas, and in June 2005, the SCDMV sent the
complaint to Deaton by certified mail. The return receipt was ostensibly signed
by Deaton on June 27, 2005. Deaton denies ever receiving the Summons and
Complaint. Deaton did not answer or otherwise appear, and the circuit court
filed an order of default on August 1, 2005. Deaton failed to respond to
notice of the damages hearing, and in September 2005, the court entered judgments
totaling $800,000 against Deaton; $750,000 for Ann McClurg and $50,000 for
Stephen McClurg.

On October 5, 2005,
after the expiration of the statute of limitations, Insurer contacted Lawyer's
office to check on the status of the settlement negotiations, but Lawyer's
staff would not give Insurer any information. On October 7, 2005, Insurer
received a copy of the Deaton default judgment from Lawyer. In the letter
accompanying the copy of the default judgment, Lawyer requested payment from
Insurer to satisfy the judgment against Deaton. This is the first notice
Insurer and New Prime had of the suit brought against Deaton. On that same
day, Deaton made a motion to set aside the default judgment under Rule 60(b)(1)
and (b)(3), SCRCP. New Prime subsequently motioned to intervene and moved to
set aside the default judgment under this rule, as well. The circuit court
granted New Prime's motion to intervene, but denied both Deaton's and New
Prime's Rule 60(b) motions. The circuit court subsequently denied the parties'
motions for reconsideration under Rule 59(e), SCRCP.

On appeal, the
court of appeals affirmed in a 2-1 decision, with then-Chief Judge Hearn dissenting. McClurg v. Deaton, 380 S.C. 563, 580, 671 S.E.2d 87, 96 (Ct. App.
2008). The denial of relief for Petitioners rested entirely on the
determination that Petitioners failed to raise a meritorious defense when
motioning to set aside the default judgment. Id. at 573, 671 S.E.2d at
93. On the merits, the court of appeals held that, as an intervening party to
the action, New Prime was entitled to relief under Rule 60(b), SCRCP, if it
satisfied one of the Rule's requirements.[3]Id. at 573, 671 S.E.2d at 92-93. The court
of appeals then found that, at a minimum, the required element of surprise
existed. Id. at 573, 671 S.E.2d at 92. The court opined that Lawyer's
actions would most likely satisfy the misrepresentation and misconduct element
of Rule 60(b)(3), SCRCP, as well. Id. at 573, 671 S.E.2d at 92-93.
However, the court declined to offer relief to Petitioners, determining that
any meritorious defense that may have existed in the record was not raised to
or ruled upon by the trial court. Id. Then-Chief Judge Hearn dissented
with respect to that conclusion, stating she believed Petitioners raised a
meritorious defense in the course of the pleadings. Id. at 580, 671
S.E.2d at 96. In short, I would adopt Judge Hearn's dissent.

Petitioners'
request for rehearing en banc was denied by a vote of 5 in favor, and 4
opposed.[4] This Court granted both Deaton's and New Prime's
petitions for writs of certiorari.

Our standard of review in this case is
deferential. The decision to grant or deny a motion for relief from judgment
lies within the sound discretion of the trial court and will not be disturbed
on appeal absent an abuse of discretion. BB&T v. Taylor, 369 S.C. 548, 551, 633 S.E.2d 501, 502-03 (2006). "An abuse of discretion arises where the judge
issuing the order was controlled by an error of law or where the order is based
on factual conclusions that are without evidentiary support." Id. at 551, 633 S.E.2d at 503.

Deaton and New Prime briefed their issues separately
to the Court, and present a variety of issues. Because the question of whether
Petitioners raised a meritorious defense is dispositive, I address it first.
Both the court of appeals and the majority of this Court determined a
meritorious defense was neither raised to, nor ruled upon by the circuit
court. In so finding, both courts disposed of this case on preservation
grounds. I disagree with such a disposal.

Our courts require
a party seeking to set aside a default judgment also raise a meritorious
defense. See Mitchell Supply Co., Inc. v. Gaffney, 297 S.C. 160, 163,
375 S.E.2d 321, 323 (Ct. App. 1988) (noting the South Carolina Code section
that was the precursor to the South Carolina Rules of Civil Procedure required
a showing of a meritorious defense, and holding the passage of the Rules do not
change that requirement). It is in the interest of judicial efficiency that
our courts require a meritorious defense. To borrow a statement from Chief
Judge Sanders writing for the court of appeals: "[w]hatever doesn't make a
difference doesn't matter" in the law. McCall v. Finley, 294 S.C.
1, 4, 362 S.E.2d 26, 28 (Ct. App. 1987). As the meritorious defense
requirement derives from the policy that courts do not engage in acts of
futility:

A
meritorious defense need not be perfect[,] nor one which can be guaranteed to
prevail at a trial. It need be only one which is worthy of a hearing or
judicial inquiry because it raises a question of law deserving of some
investigation and discussion or a real controversy as to real facts arising
from conflicting or doubtful evidence.

In EM-CO Metal
Products, Inc. v. Great Atlantic & Pacific Tea Co., the appellant
argued respondents did not make a prima facieshowing of a meritorious
defense. 280 S.C. 107, 115, 311 S.E.2d 83, 88 (Ct. App. 1984). Although the
circuit court order did not set forth the facts upon which it found a
meritorious defense, the court of appeals affirmed the finding of a meritorious
defense based on evidence found in the record. Specifically, the court of
appeals found evidence of a meritorious defense in the plaintiff's complaint
and in a letter introduced by the plaintiff at a hearing. 280 S.C. 107, 115,
311 S.E.2d 83, 88 (Ct. App. 1984). Although the letter purported to set forth
the plaintiff's position, the court found it nevertheless demonstrated that
both defendants in that case possessed a meritorious defense. Id.
Importantly, the documents relied upon by the court of appeals were supplied by
the plaintiff, not the party seeking to have the judgment set aside. The
majority states that in EM-CO, the court was merely asserting its Rule
220(b), SCACR, authority to affirm a ruling on any ground found in the record.
Perhaps, but on several occasions, our courts have reversed the denial
of a Rule 60(b) motion by finding the existence of a meritorious defense in the
record. In Thompson, this Court reversed the denial of a Rule 60(b)
motion, finding testimony made at the motion hearing revealed the existence of
a real controversy, and therefore, the petitioners in that case presented a
meritorious defense. Thompson, 299 S.C. at 120, 382 S.E.2d at 903
(1989). In Williams v. Watkins, Jr.,the court of appeals
reversed the circuit court's denial of a Rule 60(b) motion by gleaning a
meritorious defense from the record. 384 S.C. 319, 326-27, 681 S.E.2d 914,
917-18 (Ct. App. 2009). In reversing, the court stated, "[w]ith respect
to the meritorious defense factor, the record contains evidence Watkins made a
prima facie showing of a meritorious defense to Williams' claims." Id. The majority distinguishes Williams on the ground that the court
found a meritorious defense in a pleading. As I have noted, both Petitioners
presented a meritorious defense in the memoranda supporting their Rule 60(b)
motions. I do not understand the majority's distinction.

In yet another
case, the court of appeals found a meritorious defense in a party's prehearing
statement. Mictronics, Inc. v. S.C. Dep't Rev., 345 S.C 506, 511, 548
S.E.2d 23, 226 (Ct. App. 2001). In so finding, the court reiterated that the
standard for finding a party raised a meritorious defense is a low one. Id. ("To establish a meritorious defense, a party is not required to show an
absolute defense."). Further research would likely reveal a multitude of
similar cases. In my view, the key inquiry is merely whether the materials
submitted to the trial court reflect, in any way, that a contest on the merits
might render different results than the result reached by the default
judgment.

In this case, the
majority of the court of appeals, and this Court's majority, rests on the
conclusion that the moving party must expressly indicate to the court that a
Rule 60(b) argument is being made for the purpose of providing a meritorious
defense. The court of appeals recognized New Prime's argument on appeal that
its defense related to the discrepancy in damages awarded versus the amount
offered by Lawyer during settlement negotiations. McClurg, 380 S.C. at
575, 671 S.E.2d at 94. In reviewing the record, the court noted an allegation
in an affidavit by the Insurer's employee that Lawyer offered a far lesser
amount during settlement negotiations. Id. at 575-76, 617 S.E.2d at
94. The court found that statement was not made for the purpose of raising a
meritorious defense. Id. at 576, 617 S.E.2d at 94. The court did not
reach the question of whether this evidence could constitute a meritorious
defense, but stated, "even assuming for the sake of argument that this
bare assertion regarding settlement negotiations is evidence of a defense to
the amount of damages, the argument is not preserved for our review as it was neither
raised to nor ruled upon by the trial court." Id. In my view,
Petitioners each raised a meritorious defense to damages directly within the
memoranda supporting their motions to set aside the default judgment, and
supported that claim in an affidavit of a claims specialist with the Insurer.
New Prime's memorandum states: "Neither Zurich nor New Prime heard about
the suit that was filed against Deaton until . . . after the default judgment
for $800,000 was entered. Plaintiff's counsel had previously demanded $170,000
to settle the matter." Likewise, Deaton's memorandum characterizes the
judgment as a "windfall," stating "their Counsel made a
settlement demand of $170,000 from Zurich on April 26, 2004, little over a year
before the Default Judgment of over four times that amount was entered."
To support the claim that the damages on default far exceeded what would have
otherwise been awarded with a decision on the merits, Deaton provides the
affidavit of a claims specialist with the Insurer that stated Ann McClurg
incurred medical expenses of approximately $21,000, and Respondents made a
settlement offer of $170,000.[6]

In addition to its
contention that a meritorious defense was not raised to the circuit court, the
majority argues that neither Petitioner challenged the circuit judge's finding
that there was no showing of a meritorious defense in their motions for
reconsideration. Because I believe Petitioners raised a meritorious defense in
their original pleadings and that the circuit judge ruled on that issue, our
preservation rules do not require they contest that finding in a motion for
reconsideration. See Elam v. S.C. Dep't of Transp., 361 S.C. 9, 24, 602
S.E.2d 772, 780 (2004) (a party is only required to file a motion to reconsider
when an issue has been raised but not ruled upon by the court). Nevertheless,
Deaton did raise the meritorious defense of the discrepancy in damages as a
third ground in his motion for reconsideration. (see App. at 184-85,
"Because of the defect in pleading and disparity between the award and
medical expenses, the default judgment should be set aside;" see also App. 542-43.) This being clear, the majority is apparently expounding the view
that a party must use the magic words, "meritorious defense," when
arguing that a court may have reached a different result had it heard a case on
the merits. As elaborated, our courts have never before required such explicit
language.

The majority
finally attempts to prove the issue unpreserved by concluding Petitioners did
not challenge the circuit court's finding of no meritorious defense in its
appeal to the court of appeals. To the contrary, Deaton appealed the circuit
court's meritorious defense ruling in his third issue before the court of
appeals. There, Deaton again argued that because the McClurgs' complaint did
not include a request for damages from future loss of in-kind services, it was
error for the trial court to award Ann McClurg $600,000 in damages on that
ground. That argument represents a meritorious defense as it "raises a
question of law deserving of some investigation and discussion or a real
controversy as to real facts arising from conflicting or doubtful evidence." Thompson v. Hammond, 299 S.C. 116, 120, 382 S.E.2d 900, 903 (1989).

The question of
whether a meritorious defense can relate to damages or if it can relate only to
the existence of liability is one of first impression in this state. It was
clear in both Deaton's and New Prime's motions to set aside default judgment
that, if given the opportunity to defend the lawsuit properly, the outcome may
very well have been different based on the actual damages incurred. Therefore,
I believe that when the circuit judge found "there has been no showing
that a meritorious defense exists in this case," he reached this
conclusion on the belief that Petitioners were required to raise a defense to
liability. Petitioners argued to the court of appeals, and to this Court, that
its meritorious defense related to the discrepancy in damages awarded. Because
I agree with Petitioners that a meritorious defense can relate not only to the
liability of the defendant, but also to the amount of damages awarded, I
believe it was error for the court of appeals to find the issue was not raised
to or ruled upon by the circuit court, and I dissent from the majority's
similar disposition of this case.

In support of my
position, I note other courts have recognized that an allegation relating to
the amount of damages satisfies the meritorious defense requirement. See,
e.g., Augusta Fiberglass Coatings, Inc. v. Fodor Contracting Corp.,
843 F.2d 808, 812 (4th Cir. 1988) (discussing the meritorious defense raised:
"[a]lthough these statements address the amount, rather than the
propriety, of Augusta's claim, we believe that taken together they are a
sufficient proffer of a meritorious defense"); Wayneright's Vacations,
LLC v. Pan American Airways Corp., 130 F.Supp.2d 712, 719 (D. Md. 2001)
(discussing Augusta Fiberglass and concluding, "[t]he company has
raised a viable dispute about the amount it owes Pan Am"); Esteppe v.
Patapsco & Back Rivers Railroad, 2001 U.S. Dist. LEXIS 7112, 2001 WL
604186 (D. Md. 2001) (appellant raised a meritorious defense "by
contradicting the amount claimed by plaintiff"). There are many
instances, and this case is an example, where a defendant does not contest
liability, but contests the extent of damages owed. Restricting the scope of a
meritorious defense to liability alone incentivizes a party who may otherwise
concede liability to deny any wrongdoing. I do not believe our courts wish to
encourage that practice. At oral argument before this Court, there was concern
that allowing a meritorious defense to damages might impede the finality of
judgments, in that any discrepancy between actual damages and awarded damages
could be a basis for setting aside a default judgment. I note that a
meritorious defense to the amount of damages awarded must first be accompanied
by a showing that the action filed meets the requirements of Rule 60(b)(1)-(5),
SCRCP.

After surmounting
the meritorious defense hurdle, I side with the court of appeals' view that by
virtue of allowing New Prime to intervene, it was entitled to an order setting
aside the judgment if New Prime could meet the requirements of Rule 60(b)(1) or
(b)(3). McClurg, 380 S.C. at 571, 671 S.E.2d at 92. Our holding in Edwards
v. Ferguson, is instructive on this point. 254 S.C. 278, 175 S.E.2d 224
(1970). In that case, Ferguson and his insurance company moved to set aside a
default judgment on the ground that it was taken by mistake, inadvertence,
surprise, or excusable neglect. Id. The plaintiff in that case
attempted to settle with the insurance company. Id. When settlement
did not develop, the plaintiff served a summons and complaint to the home of
Ferguson. Id. Ferguson did not answer or inform his insurance company of
the complaint, and the circuit court entered default judgment for the
plaintiff. Id. This Court found the insurance company "stands in
the shoes of [its insured] so far as liability is concerned." Id. at 282, 175 S.E.2d at 226.

I agree with the court
of appeals that the trial court erred in finding the elements of Rules 60(b)(1)
and (b)(3) could not apply to New Prime since New Prime was not the party
served. The burden of this judgment ultimately will fall on New Prime's
shoulders and, therefore, I believe the court of appeals properly found New
Prime could stand in Deaton's shoes when arguing the existence of surprise,
misrepresentation, or misconduct under Rule 60(b)(1) and (b)(3), SCRCP.

On the facts in the
record, I believe New Prime undoubtedly met both the surprise element of Rule
60(b)(1) and the misconduct element of Rule 60(b)(3) when moving to have the
default judgment set aside. At oral argument before this Court, Lawyer
admitted he was trying to fly under the radar in serving Deaton because of the
prolonged, and seemingly unsuccessful, settlement negotiations with Insurer.
Although prolonging settlement negotiations in hopes of surpassing the statute
of limitations is a disdainful practice some insurance companies keep, this in
no way justifies the type of "gotcha" game played by McClurgs'
counsel in this case.

In sum, I would
find Petitioners met their burden to set aside the default judgment by
demonstrating the existence of surprise and misconduct. Further, in my
opinion, Petitioners' supporting memoranda and affidavits to the Rule 60(b)
motions provided the court a basis for concluding that a contest on the merits
might result in a different outcome by illustrating the discrepancy between the
amount of damages awarded and the actual damages suffered or the settlement
offer advanced by Respondents. It was an error of law for the circuit judge to
determine that because Petitioners did not deny liability, Petitioners did not
raise a meritorious defense. I believe it was error for the court of appeals
to conclude Petitioners did not raise a meritorious defense, and accordingly, I
part ways with the majority in its affirmance of the court of appeals on that
ground.

[1] "Preserving issues for appellate review is a fundamental component of
appellate practice." Toal, Vafai, Muckenfuss Appellate Procedure in
South Carolina (1999) 65. Issue preservation requires that the question
presented to the appellate court "must first have been fairly and properly
raised in the lower court and passed upon by that court." Id. The
dissent would alter these well-settled precepts in favor of burdening trial
courts with discerning the issues a party should raise, and perusing the record
for evidence to support those issues.

Here, the dissent would find the issue of a
meritorious defense raised by New Prime when, in two sentences in the portion of
its pretrial memorandum titled "Background," which preceeds the
section titled "Argument," it states:

Neither Zurich nor New Prime heard
about the suit that was filed against Deaton until October 7, 2005, after the
default judgment for $800,000 was entered (see Affidavit of Gail Meyer at ¶
13-14). Plaintiff's counsel had previously demanded $170,000 to settle the
matter.

The dissent also finds Deaton raised a meritorious
defense when, in its "Supplemental Memorandum in Support of Amended Motion
to Set Aside Default Judgment," he footnoted his text sentence
"Therefore, the Plaintiffs' loss of a windfall Default Judgment simply
should not be a factor in the Court's decision" with the following:

It is appropriate to characterize
the Default Judgment as a windfall for Plaintiffs given the fact that their
Counsel made a settlement demand of $170,000 from Zurich on April 26, 2004,
little over a year before the Default Judgment of over four times that amount
was entered. See Exhibit A ¶ 16.

To say that these three sentences "fairly and
properly raised" the issue of a meritorious defense to the circuit court,
albeit without use of "magic words" strains credulity, as does the
suggestion that Thompson v. Hammond, 299 S.C. 116, 382 S.E.2d 900 (1989)
stands for the proposition that a party need not argue "the existence of a
meritorious defense within a Rule 60(b) motion."

Moreover, it is well-settled that the moving
party in a Rule 60(b) motion has the burden of presenting evidence entitling him to relief. BB&T v. Taylor, 369 S.C. 548, 633 S.E.2d
501 (2006) (emphasis supplied). Memorandum in support of a motion is not
evidence. Harris Teeter, Inc. v. Moore & Van Allen, PLLC, 390 S.C.
275, 701 S.E.2d 742 (2010) (Hearn, J., dissenting). Even if we were to find
that the issue of a meritorious defense were suggested by the memoranda,
neither petitioner could be said to have presented evidence of such a defense
as it is beyond cavil that a settlement offer is not evidence. Rule 408, SCRE; Fesmire v. Digh, 385 S.C. 296, 683 S.E.2d 803 (Ct. App. 2009).

Finally, if we were to construe the trial
judge's statement that "there has been no showing of a meritorious
defense" as a ruling rather than an observation, compareMize v.
Blue Ridge Ry. Co., 219 S.C. 119, 64 S.E.2d 253 (1951) (mere observations
by trial judge do not enlarge grounds upon which motion is made), the fact
remains that he would have been correct. Rule 408, SCRE; Fesmire, supra.

[2] Although both petitioners filed motions for reconsideration in the trial court,
neither challenged the finding of the circuit court that there was no showing
of a meritorious defense. Moreover, petitioner New Prime did not challenge the
finding of no meritorious defense in its appellant's brief. Petitioner
Deaton, in his appellant's brief, referenced a discrepancy between the
documented medical expenses and the damages award only in support of his
argument that there was a defect in respondent's pleading warranting a setting
aside of the default judgment. The settlement offer was not mentioned. The
"substantial discrepancy between the settlement offer and the amount
awarded upon default" relied upon by the dissent as the basis for a
meritorious defense appears for the first time in petitioners' appellate reply
briefs. It is axiomatic that an issue cannot be raised for the first time in a
reply brief. Chet Adams Co. v. Jones F. Pedersen Co., 307 S.C. 33, 413
S.E.2d 827 (1992).

None of the cases cited by the dissent
support the dissent's proposition that a party is not required to argue to the
trial or appellate court that it has a meritorious defense in order to obtain
Rule 60(b) relief. In EM-CO Metal Prods., Inc. v. Great Atlantic &
Pacific Tea Co., 280 S.C. 107, 311 S.E.2d 83 (Ct. App. 1984), the Court of
Appeals affirmed an order relieving respondent from a default judgment under
the statutory predecessor to Rule 60(b), citing both deference to judicial
discretion and the "liberal spirit" of the statute, a spirit which
did not survive the adoption of the SCRCP. Sundown Operating Co., Inc. v.
Intedge Industries, Inc., 385 S.C. 601, 681 S.E.2d 885 (2009) (standard for
relief under Rule 60(b) rigorous). Moreover, in EM-CO, the appealed
order stated respondent had a meritorious defense but did not support this
conclusion of law by factual findings. Appellant argued this omission required
reversal. The Court of Appeals, in affirming this conclusion, noted there was
evidence in the record to support it in an attorney's letter. In EM-CO,
the court looked for evidence to affirm a finding by the trial court, while
here the dissent is searching for evidence to reverse. Moreover, the dissent
finds this evidence in mere factual recitations which reflect a settlement
offer made long before discovery was complete or a complaint had been filed.

The dissent's reliance on Mictronics,
Inc. v. S.C. Dep't of Rev., 345 S.C. 506, 548 S.E.2d 223 (Ct. App. 2001)
and William v. Watkins, 389 S.C. 319, 681 S.E.2d 914 (Ct. App. 2009) is
similarly misplaced. In Mictronics, the Court of Appeals affirmed a
circuit court order granting relief from an administrative law judge's (ALJ's)
order dismissing a contested case for procedural reasons, using its authority
to affirm an appeal for any reason appearing in the record. See Rule
220(b), SCACR. The court found the circuit court had applied the incorrect
standard in reversing the ALJ's order, and proceeded to review the case under
the correct standard. The court, applying this new standard, found evidence of
a meritorious defense in the respondent's prehearing statement, that is, the
document it had filed with the ALJ in support of the merits of its claim that
it was entitled to a tax exemption. This decision does not stand for the
proposition that an appellate court must search the record for evidence of a
meritorious defense in order to reverse an appealed order, but rather that when
affirming for any reason, the court may rely on arguments actually raised by
the party below. In William v. Watkins, the Court of Appeals found the
meritorious defense in the party's pleading.

Here, the dissent does not rely on any
argument made to the lower tribunal but instead searches the record for
evidence to support an argument raised for the first time in a petition for
rehearing after the Court of Appeals had affirmed the appeal. It is axiomatic
that an issue cannot be raised for the first time on rehearing. E.g., Nelson
v. QHG of South Carolina, Inc., 362 S.C. 421, 608 S.E.2d 855 (2005).

The dissent goes beyond plain error, and
would require appellate courts to search the record in an effort to reverse.
This we should not do. E.g.,Elam v. S.C. Dep’t of Transp., 361
S.C. 9, 602 S.E.2d 772 (2004).

On motion and
upon such terms as are just, the court may relieve a party or his legal
representative from a final judgment, order, or proceeding for the following
reasons:

(1) mistake, inadvertence, surprise or excusable neglect;

. . .

(3) fraud, misrepresentation, or other misconduct of an adverse party

.
. . .

[4] "It shall require the affirmative vote of six (6) members of the Court of
Appeals to hear or rehear an appeal or other proceeding en banc." Rule
219, SCACR.

[5] In asserting the contrary position, the majority notes the rigorous standard
of Rule 60(b), SCRCP, citing Richardson v. P.V., Inc., 383 S.C. 610, 682
S.E.2d 263 (2009). Richardson stands for the proposition that the
standard for finding mistake, inadvertence, surprise or excusable neglect under
Rule 60(b)(1) or fraud and misrepresentation under 60(b)(3) is more rigorous
than the standard required to set aside an entry of default judgment under Rule
55(c). Id. Rule 60(b) requires a party make a particularized showing
of the elements under subsections 1 or 3, as opposed to Rule 55(c), where a
party may prevail with a showing of good cause. Id.Richardson does not assert that a defendant's Rule 60(b) motion must include the words
"meritorious defense" to demonstrate that adjudication on the merits
might lead to a different result. Additionally, the "liberal spirit"
of Rule 60(b) did not see its demise with the adoption of the South Carolina
Rules of Civil Procedure (SCRCP), as the majority contends. As stated in Thompson
v. Hammond, 299 S.C. at 122, 382 S.E.2d at 904 (J. Chandler dissenting),
and supported in numerous cases decided after the adoption of the SCRCP
(discussed herein), "Rule 60(b)(1) is virtually identical to S.C. Code
Ann. § 15-27-130 (1976), which was repealed in 1985 with enactment of the Rules
of Civil Procedure."

[6] The majority argues that because a settlement offer is not admissible evidence
of damages under Rule 408, SCRE, these statements cannot fairly be construed as
meritorious defenses. I reiterate that the purpose of requiring a meritorious
defense when petitioning a court to set aside a default judgment is simple—to
prevent courts from engaging in acts of futility by re-opening litigation where
there is no real controversy. I do not consider the settlement offer
referenced by Petitioners to represent evidence of what the damages ought to
be. However, I believe that the evidence meets the low bar set for a
meritorious defense in that it merely demonstrates the existence of a real
controversy and the probability that a decision on the merits might render a
different result.